GLOBAL TRAFFIC NETWORK, INC.

On August 2, 2011, we entered into a definitive agreement (the “Merger Agreement”) to be acquired by an affiliate of GTCR, LLC (“GTCR”). Under the terms of the Merger Agreement, GTCR Gridlock Holdings, Inc., a newly formed entity affiliated with GTCR, commenced a tender offer on August 9, 2011 to acquire all of our outstanding common stock for $14.00 per share in cash (the “Offer”), to be followed by a merger (the “Merger”) to acquire all remaining outstanding shares at the same price paid in the Offer. Under the Merger Agreement, in general, the Company is permitted, under a “go-shop” provision, to solicit, provide information to, and engage in discussions with, third parties with respect to alternative acquisition proposals until September 13, 2011. Subject to certain requirements of the Merger Agreement, the Company may negotiate with parties that submit qualifying competing proposals during the initial solicitation period for a period expiring on October 1, 2011. The Offer is required to remain open until the completion of the solicitation period, and if applicable, the subsequent negotiation period. The completion of the Offer and Merger are subject to certain conditions (including, with respect to the Offer, a “minimum condition” that requires there to be tendered and not withdrawn a number of shares that represents at least a majority of the shares of Company common stock then issued and outstanding, excluding from such calculation shares held by the Company’s executive officers) and termination rights set forth in the Merger Agreement. The transactions contemplated by the Merger Agreement are expected to be completed by the fourth quarter of 2011. See “Item 1A —Risk Factors.” The statements in this Annual Report on Form 10-K are not a solicitation or recommendation of the Company to its shareholders in connection with the proposed Offer, and shareholders should carefully review the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on August 9, 2011 and any amendments thereto before making any decision as to the Offer because such documents contain important information about the Offer, the Merger and other transactions contemplated by the Merger Agreement. The Solicitation/Recommendation Statement on Schedule 14D-9 and the amendments thereto are available, without charge, at the SEC’s internet site (http://www.sec.gov) or by directing a request to Global Traffic Network, Inc., Attention: Investor Relations, Phil Carlson, KCSA Strategic Communications, 880 Third Avenue 6th Floor, New York, NY 10022, pcarlson@kcsa.com, or on the Company’s website at (www.globaltrafficnetwork.com).

There is significant risk and uncertainty surrounding our acquisition of The Unique Broadcasting Company Limited from UBC Media Group plc.

There are numerous risks associated with our March 2009 acquisition of Unique, for which we paid total cash consideration of approximately $16.1 million. Among these risks is our lack of experience with acquisitions in general and large acquisitions in particular. Although certain members of management have experience with acquisitions of existing businesses (including traffic reporting services), our company’s only previous acquisition was that of Wise Broadcasting Network Inc., which was not material to our operations. Additional risks associated with the Unique acquisition include issues overlooked or improperly assessed during our due diligence process, loss of key employees, radio stations and/or advertisers following completion of the transaction and additional competition arising after the acquisition. In addition, despite similarities between the radio networks that we purchased in the United Kingdom and our networks in Australia and Canada, the business models are not identical and may require significant transition, which may not prove successful. Some of those differences in the existing business model of the acquired business include the variable nature of station compensation payments, the outsourcing of operations to third parties, the pre-produced and lengthier structure of commercial advertisements, the provision of traffic information to many stations in lieu of anchored reports, the sale of commercial inventory on a national network basis only, the more restrictive nature of sales limitations from the radio stations and the group approach to advertising sales. An inability to transition successfully this business model to a model that is more consistent with our Australian and Canadian operations may result in a retrospective determination that we misjudged the true value of the target company’s business. Further, it is likely that we will not be able to completely transition the acquired business to our existing model, resulting in a hybrid approach of our practices in Australia and Canada and the existing practices in the United Kingdom. In addition, the United Kingdom radio market continues to be in a recession. These risks are increased by our relative inexperience in the United Kingdom market. Because we paid a high multiple of operating income for Unique, if we do not continue the improved performance of the acquired business, the amount of capital that we expended may be greater than the ultimate value of the acquired business. All of these potential risks may have a material adverse effect on our company’s consolidated financial condition and results of operations and negatively impact our business prospects. The price of our common stock could decline as a result.

Our expansion into new Australian, Canadian, United Kingdom and other international markets and continued growth of our services in these markets may require significant additional capital resources. These future capital needs are difficult to predict. We may require additional capital in order to implement an expanded business model, to take advantage of certain opportunities, including strategic alliances and potential acquisitions, or to respond to changing business conditions and unanticipated competitive pressures. Moreover, our day-to-day operations require the use of sophisticated equipment and technology. The maintenance and replacement of such equipment requires significant expenditures. In addition, the development of Global Alert Networks’ mobile phone applications could require significant amounts of capital in order to pursue the opportunity, with no guarantee of future profitability. We used $16.1 million to fund our purchase of Unique in March 2009, including our settlement of the related contingent payment obligations. These payments constituted a significant portion of our cash on hand at the time of the closing. Although we believe that our current cash and cash equivalents and the availability of financing under our line of credit will be sufficient to fund our operations for the next 12 months, we may need to seek additional funds either by borrowing money or issuing additional equity in order to handle unforeseen contingencies or take advantage of new opportunities. As the terms and availability of financing depend to a large degree upon general economic conditions and third parties over which we have no control, we can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms. In addition, our ability to obtain financing depends on a number of other factors, many of which are also beyond our control, such as interest rates and national and local business conditions. If the cost of obtaining needed equity or debt financing is too high or the terms of such equity or debt financing are otherwise unacceptable in relation to the strategic opportunity we are presented with, we may be unable to take advantage of new opportunities or take other actions that otherwise might be important to our business or prospects. Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures. Additional equity financing could result in dilution to our stockholders and the price of our common stock could decline as a result.

If we fail to manage our growth effectively by investing in the necessary infrastructure, the quality of our products and services may suffer, negatively impacting our Affiliate Contracts.

Salary and Bonus. On November 18, 2005, we entered into an employment agreement with William L. Yde III, our Chief Executive Officer and President, that had a term of five years and became effective on March 29, 2006, the closing date of our initial public offering. Pursuant to this agreement, Mr. Yde initially received a base salary of $350,000 per year and was entitled to $50,000 increases in his base salary on July 1 of each year provided that the Company achieved certain profit levels to be determined by the Board for the preceding fiscal year. Mr. Yde received base salaries of $450,000 and $475,000 per year for fiscal 2009 and 2010, respectively, and he received an annualized base salary of $525,000 during fiscal 2011 through the effective date of his new employment agreement discussed below. Under the initial agreement, as amended, Mr. Yde was also entitled to receive an annual performance-based bonus of up to 50% of his annual base salary for each fiscal year during the agreement’s term. The amount of each year’s bonus, if any, was determined and paid based upon satisfaction of certain operating profit goals to be determined by our compensation committee for the applicable fiscal year and was contingent upon Mr. Yde remaining an active employee of the Company through the end of the applicable fiscal year. In addition to reimbursing Mr. Yde for reasonable expenses incurred in performing his duties, the employment agreement provided that unless and until the Company elected to provide its United States based employees with medical insurance, the Company would pay Mr. Yde $1,000 per month in lieu providing him with medical insurance. Effective February 9, 2011, we entered into a new employment agreement with Mr. Yde that has a term that runs through June 30, 2014. Pursuant to this new agreement, Mr. Yde currently receives a base salary of $595,000 per year and is eligible for $25,000 discretionary increases in his base salary on July 1 of each year (starting July 1, 2012) provided that the Company achieves certain profit levels to be determined by the Board for the preceding fiscal year. As with his prior employment agreement, Mr. Yde is entitled to receive an annual performance-based bonus of up to 50% of his annual base salary for each fiscal year during the agreement’s term with the amount of each year’s bonus, if any, to be determined and paid based upon satisfaction of certain operating profit goals to be determined by our compensation committee for the applicable fiscal year and is contingent upon Mr. Yde remaining an active employee of the Company through the end of the applicable fiscal year. Also consistent with his prior employment agreement, Mr. Yde’s new employment agreement provides for the reimbursement of reasonable expenses incurred in performing his duties and for the payment of $1,000 per month unless and until the Company elects to provide its United States based employees with medical insurance. The agreement requires Mr. Yde to devote substantially all of his working time to our Company.

On August 31, 2011, Broadbased Equities, a purported shareholder of the Company, filed a complaint captioned Broadbased Equities v. William L. Yde III, et al. on behalf of itself and as a putative class action on behalf of the Company’s public shareholders in the Supreme Court of the State of New York, County of New York. The complaint names as defendants the members of the Company’s board of directors, as well as the Company, GTCR and certain of its affiliated entities. The plaintiff alleges, among other things, that the Company board of directors breached its fiduciary duties of care, loyalty, good faith and fair dealing to shareholders, and that the Company board of directors and the Company breached their fiduciary duties to disclose material facts to shareholders, in each case, in connection with the Offer and the Merger. The complaint further claims that GTCR and certain of its affiliated entities aided and abetted those alleged breaches of fiduciary duties. The complaint seeks (i) injunctive relief, including to enjoin the Offer and the Merger, (ii) a determination that the action is a proper class action and that the plaintiff is a proper class representative, (iii) a declaration that the defendants breached their fiduciary duties to the plaintiff and other Company shareholders and/or aided and abetted such breaches, (iv) additional disclosures with respect to the Offer and the Merger, (v) compensatory and/or rescissory damages and (vi) an award of attorneys’ and other fees and costs in addition to other unspecified relief. The defendants believe that the allegations in the complaint are without merit and intend to vigorously contest the action. A copy of the complaint is attached as an exhibit to Amendment No. 2 the Schedule 14D-9 filed by the Company on September 6, 2011, and as a result, the foregoing summary of the complaint does not purport to be complete and is qualified in its entirety by reference to such complaint and is incorporated herein by reference.